Comment regarding recent Intel post worth noting

Posted on November 9, 2009

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I recently made the following comment in reference to my role and responsibilities as a writer; “My job is not to make you see the world my way, but is instead to alert you as a reader of other possibilities and in the process cause you to think outside of the framework within which you are most familiar and most comfortable.  The conclusion still remains yours to reach.”

A recent comment to one of my posts “Intel, UNC’s Coal Supply and Abbott’s Bottles: When the Shoe is on the Other Foot” illustrated this point because it inspired discussion and ultimately the need to delve deeper to better understand the context in which my article was originally written.

Here is the reader’s observation, and my subsequent response (which I hope gives further pause for thought):

Comparing CPU’s to CPG is invalid…

The size of the supply base and the depth of the relationship, as well as the contractual vehicle / T&C’s used to control the relationship, vary depending on many factors. Not the least of which is the technological complexity of what is being bought.

Comment by Kevin McHenry — November 7, 2009 @ 6:50 am

Thank you for your comment Kevin.

As indicated by the absolute power reference, the broad application of any strategy regardless of what it is is fraught with undesired ramifications.

There are of course instances when a field of suppliers has to be narrowly defined based on the very complexity to which you had referred. In short, I would not go to Mom and Pop’s corner store to by a pacemaker.

That being said, the point of the article is to illustrate the fact that in those instances when a specialized supply base is utilized, challenges such as with the Intel relationship, or the UNC coal transport contract negotiations create a vulnerability that raises the question, why do organizations seek to replicate this scenario through broadly applied rationalization strategies across their entire spend in an attempt to artificially reduce the number of transactions?

That of course was the point of the article.

Thank you again for taking the time to comment. Your thoughts are very much appreciated.

Comment by procureinsights — November 9, 2009 @ 1:22 pm

Whether intended or not, Kevin’s observation is an important one in that he zeros in on the fact that one must first consider the circumstances including what is actually being purchased, and whether or not it is conducive to a strategic relationship.

When organizations such as a Best Buy, Kraft, or for that matter P&G implement a rationalization strategy, their focus is on the program itself and the purported “savings” it is supposedly going to deliver.

They usually assign interesting or catchy monikers to the undertaking such as the “preferred vendor” status as if that will somehow give legs to the undertaking.  (Note: I am reminded here of an observation from Jim Collins’ Good to Great – “Companies that make the change from good to great have no name for their transformation—and absolutely no program.”)

In reality, there are no silver bullets or magical, catch-all strategies that can be broadly applied across an enterprise’s entire spend.

As highlighted with Kevin’s comment and my subsequent response, effective strategies involving the development, engagement and utilization of an organization’s supply base is the result of thoughtful contemplation not program proclamation.  Or to end with Jim Collins’ reference to the final myth, “dramatic results do not come from dramatic process—not if you want them to last, anyway.”